Exchange rate and balance of payment crisis risks in the global development finance architecture

Alfredo Schclarek () and Jiajun Xu

Journal of International Financial Markets, Institutions and Money, 2022, vol. 79, issue C

Abstract: We analyze exchange rate and balance of payment crisis constraints when multilateral development banks (MDBs) lend, in hard currency, to national development banks (NDBs), for NDBs to onlend to investment projects. Investment projects may be “export-enhancing” (EXIPs), which generate hard currency, or “domestic-oriented” (DOIPs), which do not generate hard currency. To increase the proportion of onlending to DOIPs, MDBs should increase their refinancing to NDBs. Furthermore, MDBs have to reduce the interest rate charged on NDBs. In addition, high return EXIPs need to be financed, and more locally-produced supplies, in contrast with imported supplies, should be fostered.

Keywords: Exchange rate risk; Balance of payment crisis risk; Development banks; Export-enhancing; Refinancing (search for similar items in EconPapers)
JEL-codes: E44 E51 G01 G21 G28 H81 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:79:y:2022:i:c:s1042443122000580

DOI: 10.1016/j.intfin.2022.101574

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